There are many emerging trends in the communications world, including the increase in network technology and the proliferation of data networks. These trends have advanced the proliferation of e-commerce, i.e., commerce that occurs over an electronic network such as the Internet. E-commerce enables certain customers to purchase goods and services using an account number by contacting a merchant directly over an electronic network. Common e-commerce scenarios include a person at home using a credit card to purchase a product from an on-line store over the Internet, and an employee of a corporation acting as a buyer/authorizer for acquiring resources using a company issued account number.
Numerous differences exist between e-commerce and face-to face transactions. In an e-commerce transaction a customer cannot physically present a payment option (e.g., charge card, debit card) to a merchant. For example, in a conventional face-to-face transaction, a customer selects and presents a charge card to a merchant at the time for check out. The charge card includes various information including account number, expiration date, and may include an account code which may be verified by the merchant to ensure that the party presenting the charge card is authorized to make purchases on an associated account.
In an e-commerce transaction, three problems arise for the customer, one in the selection of a payment option, one in the transmission of information to the merchant and one in the possible compromise of information after transmission to the merchant. First as to the transmission problem, because there is no physical presentation of a payment option, the customer must rely on a network as the medium for transferring the authorizing information (account number, expiration date, billing information, account code etc.) to the merchant. Some customers are less likely to utilize e-commerce because of a perceived security inadequacy in transmission of their confidential information.
Even overcoming the fear of transmission, customers are also less likely to utilize e-commerce if the transaction is difficult to complete or requires too much time. Unlike the face-to-face transactions where a customer merely presents a payment option (e.g., hands a clerk a charge card), e-commerce transactions require authorization information to be produced and transferred at each transaction. The amount of information that has to be transferred at each transaction is not insubstantial. If the customer is required to manually enter the information at each transaction, then customers are less likely to utilize e-commerce. One solution is an electronic wallet that can be used to store payment information in a database so that the customer is not required to manually enter such at each transaction. However, much as with the transmission fear discussed above, many customers are unwilling to store such information in a database fearing the potential for unauthorized access and use of the confidential information.
Furthermore, in an e-commerce transaction a customer cannot physically “sign” a completed sales event. For example, in face-to-face transactions, a customer is typically given an authorization form such as a paper charge slip, with a final charge amount printed thereon. The customer then physically signs a name on the slip, thereby authorizing the transaction. However, equivalent “signing” procedures for e-commerce transactions are not currently generally available.
For these and other reasons, it is common that account issuers and/or conventional authorization and fraud detection systems will not guarantee payment for e-commerce transactions. As a result, the merchant is often left with the financial loss that occurs when an account number has been fraudulently used in the transaction.